Fiscal Year 2005 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns

 

February 2005

 

Reference Number:  2005-40-041

 

This report has cleared the Treasury Inspector General for Tax Administration disclosure review process and information determined to be restricted from public release has been redacted from this document.

 

February 18, 2005

 

 

MEMORANDUM FOR DEPUTY COMMISSIONER FOR SERVICES AND ENFORCEMENT

 

FROM:     Pamela J. Gardiner /s/ Pamela J. Gardiner

                 Deputy Inspector General for Audit

 

SUBJECT:     Final Audit Report - Fiscal Year 2005 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns (Audit # 200540031)

 

This report presents the results of our review of the disclosure of collection activity with respect to joint returns.  The overall objective of this review was to determine if the Internal Revenue Service (IRS) is in compliance with Internal Revenue Code Section (I.R.C. §) 6103(e)(8) (2000) related to the disclosure of collection activities to joint filers.

In summary, we could not determine if the IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to all written information requests from joint filers.  This is the seventh year in which we have reported our inability to give an opinion on the IRS’ compliance with the provisions of I.R.C. § 6103(e)(8).

The Treasury Inspector General for Tax Administration is required under I.R.C. § 7803(d)(1)(B) (2000) to annually evaluate the IRS’ compliance with the joint filer request provisions of the law.  IRS management information systems do not separately record or monitor joint filer requests, and the Congress has not explicitly required the IRS to do so.  Furthermore, we do not recommend the creation of a separate tracking system.  Accordingly, we are making no recommendations in this report.

Management’s Response:  The IRS concurs with our decision to not recommend the creation of a separate tracking system and indicated that they appreciate our support of legislation which would alleviate the requirement to perform this review.  Management’s complete response to the draft report is included as Appendix IV.

Copies of this report are also being sent to the IRS managers affected by the report results.  Please contact me at (202) 622-6510 if you have questions or Michael R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income Programs), at (202) 927-0597.

 

Table of Contents

Background

Compliance With Statutory Requirements for the Disclosure of Collection Activity With Respect to Joint Returns Cannot Be Determined

Appendix I – Detailed Objective, Scope, and Methodology

Appendix II – Major Contributors to This Report

Appendix III – Report Distribution List

Appendix IV – Management’s Response to the Draft Report

 

Background

The Taxpayer Bill of Rights 2 (TBOR2) added Internal Revenue Code Section (I.R.C. §) 6103(e)(8) (2000), which gives joint filer taxpayers who are no longer married or no longer reside in the same household the right to receive information regarding the Internal Revenue Service’s (IRS) efforts to collect delinquent taxes on their joint return liabilities.  The procedures in I.R.C. § 6103(e)(8) require that the IRS provide, in writing, collection activity information to joint filers if they send in a written request.  After passage of the TBOR2, the IRS Disclosure Office issued procedures which stated if I.R.C. § 6103(e)(8) is not specifically cited in the request, the IRS can provide either an oral or written response, based upon I.R.C. § 6103(e)(7) (2000).

The IRS Restructuring and Reform Act of 1998 (RRA 98) added I.R.C. § 7803(d)(1)(B) (2000), which requires the Treasury Inspector General for Tax Administration to review and certify annually whether the IRS is complying with the requirements of I.R.C. § 6103(e)(8).

The RRA 98 required both the Secretary of the Treasury and the Joint Committee on Taxation (JCT) to complete separate studies of the scope and use of provisions regarding taxpayer confidentiality.  The JCT issued its study report in January 2000 and recommended I.R.C. § 6103(e)(8) be amended to allow for oral information requests in addition to written requests.  The Department of the Treasury issued its study report in October 2000 with a recommendation to eliminate the requirement that joint filer information requests be in writing.  The Department of the Treasury’s report also suggested that our reporting requirement regarding joint filer requests be phased out.

In response to a recommendation in our Fiscal Year 1999 audit report, the IRS agreed to perform separate analyses by January 2001 in the former National Headquarters Collection and Customer Service functions to determine the volume of written joint filer requests received.  IRS management stated they would use the outcome of these analyses to determine if a centralized management control process to track joint filer requests was warranted.

Due to the low volume of requests identified during the Collection study, the former National Headquarters Customer Service function did not perform its analyses.  In May 2001, management in the Small Business/Self-Employed (SB/SE) and Wage and Investment (W&I) Divisions decided not to develop a new management control process to track joint filer information requests.

This review was performed at the IRS National Headquarters in Washington, D.C., in the SB/SE and W&I Divisions, and the Office of the National Taxpayer Advocate during the period October 2004 through January 2005.  This audit was performed in accordance with Government Auditing Standards.  Detailed information on our audit objective, scope, and methodology is presented in Appendix I.  Major contributors to the report are listed in Appendix II.

Compliance With Statutory Requirements for the Disclosure of Collection Activity With Respect to Joint Returns Cannot Be Determined

We could not determine if the IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to all written requests from joint filers because of our inability to identify joint filer requests received nationwide.  This condition occurred because IRS management information systems do not separately record or monitor joint filer requests.  During this review, management from the SB/SE and W&I Divisions commented that the IRS’ position has not changed from last year, and the IRS does not plan to implement a system to identify or track joint filer requests for collection activity.  In addition, there is no statutory or regulatory requirement for the IRS to develop a separate system that records or monitors these requests. 

We do not recommend the creation of a separate tracking system and are making no recommendations in this report.  This is the seventh year in which we have reported our inability to give an opinion on the IRS’ compliance with the provisions of I.R.C. § 6103(e)(8).

 

Appendix I

 

Detailed Objective, Scope, and Methodology

 

The overall objective of this review was to determine if the Internal Revenue Service (IRS) is in compliance with Internal Revenue Code Section (I.R.C. §) 6103(e)(8) (2000) related to the disclosure of collection activities to joint filers.  To accomplish our objective, we:

I.                   Obtained confirmation from the Small Business/Self-Employed and Wage and Investment Divisions that the IRS neither has, nor plans to implement, a system or process to identify or track joint filer requests for collection information relating to the requirements of I.R.C. § 6103(e)(8).

II.                Interviewed personnel in the offices of the National Taxpayer Advocate, the IRS Commissioner’s Executive Control Management System, and the Treasury Inspector General for Tax Administration to determine if there is a system or process that tracks taxpayer complaints relating to the requirements of I.R.C. § 6103(e)(8).

 

Appendix II

 

Major Contributors to This Report

 

Michael R. Phillips, Assistant Inspector General for Audit (Wage and Investment Income Programs)

Mary V. Baker, Director

Bryce Kisler, Audit Manager

Sharon Summers, Lead Auditor

Cindy Harris, Auditor

 

Appendix III

 

 

Report Distribution List

 

Commissioner  C

Office of the Commissioner – Attn:  Chief of Staff  C

Commissioner, Small Business/Self-Employed Division  SE:S

Commissioner, Wage and Investment Division  SE:W

National Taxpayer Advocate  TA

Director, Collection, Small Business/Self-Employed Division  SE:S:C

Director, Communications & Liaison, Small Business/Self-Employed Division  SE:S:C&L

Director, Compliance, Wage and Investment Division  SE:W:CP

Director, Strategy and Finance, Wage and Investment Division  SE:W:S

Chief, Performance Improvement, Wage and Investment Division  SE:W:S:PI

Chief Counsel  CC

National Taxpayer Advocate  TA

Director, Office of Legislative Affairs  CL:LA

Director, Office of Program Evaluation and Risk Analysis  RAS:O

Office of Management Controls  OS:CFO:AR:M

Audit Liaisons:

Chief, Customer Liaison, Small Business/Self-Employed Division  SE:S:COM

Senior Operations Advisor, Wage and Investment Division  SE:W:S

Director, Communications and Liaison, National Taxpayer Advocate  TA:CCL

 

Appendix IV

 

Management’s Response to the Draft Report

 

The response was removed due to its size.  To see the response, please go to the Adobe PDF version of the report on the TIGTA Public Web Page.